Seattle Genetics Inc. (Seagen) showed it fully recovered from last year’s ill-fated pact with Immunomedics Inc. by nabbing Cascadian Therapeutics Inc. – lock, stock and barrel – for $10 per share in cash, valuing the transaction at approximately $614 million. In a clear departure from the earlier deal, in which certain Immunomedics investors tampered with the tie-up until it was nothing but threads, the Cascadian merger agreement was unanimously approved by the boards of both companies.

The offer represented a 69 percent premium to Tuesday’s closing price of $5.90 for Cascadian’s stock (NASDAQ:CASC) and a 139 percent premium to the stock’s 30-day volume weighted average price. Cascadian’s shares closed Wednesday at $10.06 for a gain of $4.16.

With the pick-up of Seattle-based Cascadian, Seagen is set to gain control of tucatinib (previously ONT-380), an oral small-molecule tyrosine kinase inhibitor (TKI) that is highly selective for the HER2 growth factor receptor. Tucatinib has advanced into the randomized global pivotal trial HER2CLIMB in individuals with HER2-positive metastatic breast cancer (mBC), including those with or without brain metastases.

Tucatinib was evaluated in phase Ib studies by Cascadian, previously known as Oncothyreon Inc., as a single agent and in combination with chemotherapy and other HER2-directed agents, including Herceptin (trastuzumab, Genentech Inc./Roche Holding AG) and Kadcyla (ado-trastuzumab emtansine, Genentech/Roche). Results showed that the combination of tucatinib, capecitabine and trastuzumab was generally well-tolerated and showed activity in patients with and without brain metastases, supporting not only the ongoing pivotal trial but also suggesting a role for tucatinib in earlier lines of mBC.

That trials of tucatinib can enroll patients with brain metastases is a key differentiator for the asset, Clay Siegall, Seagen’s president and CEO, said on a conference call to discuss the Cascadian buy. Up to half of patients with HER2-positive mBC develop brain metastases over time, he pointed out. Historically, those patients have been excluded from trials even though, or perhaps because, their outcomes compared poorly to those without such metastases.

To Seagen’s knowledge, HER2CLIMB is the only pivotal study of a TKI currently designed to support its use in patients with active brain metastases, Siegall added. The trial, whose primary endpoint is progression-free survival (PFS) with key secondary endpoints of overall survival and PFS in patients with brain metastasis, is expected to be fully enrolled next year, with data scheduled to report early in 2020. Positive findings would support initial regulatory filings in the U.S. and EU, followed by the rest of the world.

Tucatinib has FDA fast track designation for the treatment of HER2-positive mBC and orphan drug designation for the treatment of breast cancer patients with brain metastases and for those with HER2-positive colorectal cancer, according to Cortellis Competitive Intelligence. The asset is under evaluation in the latter indication, in combination with trastuzumab, in the multicenter phase II MOUNTAINEER investigator-sponsored effort, expected to report data next year, according to Cortellis.

Cascadian also has an earlier-stage checkpoint kinase 1 program and is collaborating with Adimab LLC, of Lebanon, N.H., to discover antibodies against undisclosed immunotherapy targets, both in oncology.

On the conference call, Siegall cited “three key reasons” for Cascadian’s “strategic fit” with Seagen. First, he said the acquisition provides Seagen with global rights to a third late-stage opportunity for a commercial product in solid tumors that complements its phase II assets enfortumab vedotin, an anti-Nectin-4 monoclonal antibody partnered with Astellas Pharma Inc., of Tokyo, and tisotumab vedotin, an ADC composed of a human antibody targeted to tissue factor that is preparing to enter phase II studies.

“Second, tucatinib would expand upon our global breast cancer efforts with our earlier-stage program, ladiratuzumab vedotin, being developed in triple-negative breast cancer,” Siegall added. “We believe that our substantial internal expertise and relationships with key breast cancer treating physicians, coupled with the strong team at Cascadian, will allow us to maximize the potential of tucatinib.”

The acquisition also draws upon Seagen’s “deep experience in targeted therapies and underscores our focus on addressing areas of significant unmet need in cancer,” Siegall pointed out.

A spokesperson for Seagen declined comment on the deal, citing timing of the tender offer, expected next week, and a pending equity offering. In a prospectus filed Wednesday, the company indicated it plans to offer up to $550 million in common stock, including overallotments. Insiders indicated interest in purchasing up to 32 percent of those shares, according to the filing.

In the meantime, Seagen, of Bothell, Wash., said it secured a financing commitment of $400 million from Barclays and JPMorgan-Chase Bank to ensure the transaction’s completion. The balance of the deal is expected to be financed from cash on hand.

The tender offer is subject to customary conditions, including the tender of at least a majority of Cascadian’s outstanding shares and the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino act. The transaction is expected to close by the end of the first quarter.

‘Opportunistic M&A strategy’ helps to broaden SGEN’s pipeline

The Cascadian deal isn’t likely to produce the kind of drama that thwarted last year’s Immunomedics effort. That deal, which starred the antibody-drug conjugate (ADC) IMMU-132, a triple-negative breast cancer candidate, called for Seagen to provide $250 million up front plus $50 million or negotiated splits related to rights outside the U.S., Canada and the EU. Seagen – which has the approved ADC Adcetris (brentuximab vedotin) – was to develop, manufacture and commercialize IMMU-132 in multiple indications, with Immunomedics hanging onto co-promote rights in the U.S. Seagen also was set to make a commitment of up to $57 million for a stake of up to 9.9 percent by way of a purchase of common stock and warrants. (See BioWorld Today, Feb. 13, 2017.)

By May, the plan had completely unraveled after Immunomedics investor Venbio Select Advisor fought for board control and helped to stall the deal, leading to a management shake-up. Seagen walked away holding 3 million in Immunomedics common shares, or a stake of about 2.8 percent in the Morris Plains, N.J.-based company, warrants to purchase more shares and a resolve to stay opportunistic about in-licensing opportunities, Eric Dobmeier, Seagen’s chief operating officer, told BioWorld at the time. (See BioWorld Today, May 8, 2017.)

In an SEC filing, Seagen indicated that Cascadian may be required to pay $17 million in fees in the event of the new deal’s termination, along with expenses of up to $7.5 million. But no one expects dissolution this time around.

“We like SGEN’s opportunistic M&A strategy and see CASC’s tucatinib broadening SGEN’s pipeline beyond its ADC/’naked’ antibody core competency,” RBC Capital Markets analyst Kennen MacKay wrote in a Seagen report, increasing the company’s price target by $2, to $71, on the addition of tucatinib’s third-line HER2-positive mBC opportunity, where he “conservatively” forecast some $250 million in peak risk-unadjusted sales.

Although the Cascadian acquisition is outside Seagen’s core expertise in ADC technology, “it does adhere with the company’s overall strategy focused on targeted cancer therapeutics,” MacKay added. “Importantly, tucatinib differentiates from existing HER2-targeted TKIs Tykerb (lapatinib [Glaxosmithkline plc]) and Nerlynx (neratinib [Puma Biotechnology Inc.]) with substantially less GI side effects given this molecule was designed to avoid the EGFR (HER1) receptor responsible for these effects.”

Straying from its ADC orientation does inject some risk into the transaction, Suntrust Robinson Humphrey analyst Yatin Suneja added in his note, calling the deal “a bit surprising.” He speculated that the acquisition highlighted “the need to diversify business away from Adcetris in light of underwhelming ECHELON 1 data in front-line Hodgkin’s lymphoma and lack of progress in the internal pipeline.”

Data from the phase III trial of Adcetris plus the combination of adriamycin, vinblastine and dacarbazine (A+AVD) were presented in December at the American Society of Hematology (ASH) annual meeting and simultaneously published online in The New England Journal of Medicine. (See BioWorld, Dec. 12, 2017.)

Seagen had reported in June that ECHELON 1 met its primary endpoint, showing statistically significant improvement in modified progression-free survival (modified PFS) per independent review facility compared to the control arm (HR 0.77; p=0.035) of adriamycin, bleomycin, vinblastine and dacarbazine, corresponding to a 23 percent reduction in the risk of progression, death or need for additional therapy when used as front-line treatment in patients with previously untreated advanced classical Hodgkin lymphoma (cHL).

Analyst reaction to the updated data, at median follow-up of 24.9 months, was mixed. Although Suneja predicted supplemental approval of A+AVD in advanced cHL, he was “incrementally more cautious on the uptake for Adcetris” in front-line cHL based on a lack of difference in complete response and overall response rate between the study arms. In a note penned during ASH, Suneja pointed out that “the majority of the A+AVD’s benefit is occurring in stage IV patients (HR 0.71, CI 0.53–0.96), which represents [approximately] 64 percent of the patient population enrolled in the trial. The A+AVD combo showed minimal effect in stage III (HR=0.92; CI 0.60–1.4) patients.”

In his note on the Cascadian deal, Suneja acknowledged that “tucatinib’s safety profile appears to be better than that of competitor Puma Biotechnology’s Nerlynx (with a lower rate of diarrhea) and is more brain penetrant.”

Nerlynx, a dual HER2/EGFR tyrosine kinase inhibitor, suffered a setback last week when the EMA’s Committee for Medicinal Products for Human Use declined to support a marketing authorization application in extended adjuvant use for women with early stage HER2-positive breast cancer, citing concerns over the drug’s clinical relevance and risk profile in the indication. The rebuff sent Puma’s shares (NASDAQ:PBYI) down $26.20 on Jan. 24 to close at $64.70. (See BioWorld, Jan. 25, 2018.)

Cowen and Co. analyst Boris Peaker also referenced the tucatinib advantage over Nerlynx in his quick take, which looked favorably on the Seagen-Cascadian deal.

“We believe tucatinib is an attractive asset for SGEN that could provide long-term growth,” he wrote. “While there is significant clinical risk remaining, we believe tucatinib could potentially achieve [worldwide] sales of ~$400 million in late-line HER2-positive breast cancer by 2025.”

Tucatinib has shown activity in earlier lines of mBC, Peaker added, “but SGEN did not detail any future studies and it’s unclear whether it would commit to any additional late-stage studies ahead of top-line data from the pivotal HER2CLIMB study.”

Cascadian previously indicated that HER2CLIMB is enrolling ahead of internal projections and that 50 percent of patients enrolled as of late 2017 have brains metastases, “which should permit these subgroup analyses to be well-powered,” Peaker observed. In July 2017, Cascadian reported that it received positive feedback from the EMA on the design of HER2CLIMB indicating that data from the study, if positive, could support a regulatory submission.

Seagen, which is scheduled to report fourth-quarter and year-end 2017 financials on Feb. 6, also disclosed preliminary results Wednesday. For the three months ending Dec. 31, the company’s revenues were $128 million to $130 million, based on Adcetris net sales of $82 million to $84 million in the U.S. and Canada during the period. Full-year revenues were $481 million to $483 million, based on full-year Adcetris net sales of $306 million to $308 million.

Seagen reported $413 million in cash, equivalents and short-term investments as of Dec. 31.

On Wednesday, the company’s shares (NASDAQ:SGEN) lost $2.91 to close at $52.30.

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